Rental study shows young adults leaving nests

The recent annual survey by Rent.com of property managers who oversee about 1 million apartment units, has reported a surge in single tenants. (Fuse, Getty Images)

Attention, parents of boomerang children: Those young adult children of yours who returned home to the family roost — sometimes to the discomfort of all — appear to be starting to build their own nests.

These 20-somethings (or even older adult children) may be one of the enduring images of the recession: Educated but unemployed or underemployed, legions of them were reported to have given up on being able to afford their own apartments and moved back into their old bedrooms, down the hall from mom and dad.

But the recent fourth annual survey by Rent.com of property managers who oversee about 1 million apartment units has reported a surge in single tenants in the past year, suggesting that the young adults may indeed be heading out on their own, according to Kari Taylor, director of rental insights for the listings site.

In an edited interview, Taylor talked about what apartment managers in 15,000 communities are seeing (including the likelihood of a rent increase):

Q: During the housing bust, interest in renting took off, unsurprisingly. But even if, as some think, the housing market is recovering, rentals still seem to be a strong draw. Is demand in the rental market as strong as it has been for the past few years?

A: It definitely is tight. The vacancy rate for apartments in the United States was 4.3 percent in the second quarter of this year, according to Reis Inc., which tracks rental data. That's historically low, but it's basically unchanged (year over year). That (stability in vacancy rate) may actually mark the first decline in several years.

Economists are predicting that vacancy rates will drift upward very slowly and will take a few years to make a big change. Generally, they're seeing vacancies opening up to 4.9 percent of all units by the year 2017.

Q: So does this strong demand mean that units don't remain available for long?

A: Among our property managers, 73 percent said it takes one week or less to convert a prospective tenant who visits a property into a new resident. But 47 percent said it takes only a few days.

Q: If the market continues to be tight, what does that mean for the cost of rent?

A: About 60 percent of our managers predict that rents will rise over the next 12 months, and just 2 percent expect that rents will fall. Thirty-eight percent expect rates to be flat.

However, there's a lot of apartment construction going on now. CoStar Group, a real estate research firm, has predicted that 170,000 new units could open in the country's largest 54 metro areas. That report sees 190,000 new units next year and 300,000 more in 2015-16. So that might provide some stability in rental rates in some areas.

Q: Much of the data on rental trends comes from the bigger property management companies, those that handle larger apartment complexes. A lot of studies don't reflect what's happening in smaller complexes or buildings. Is that the case here?

A: We surveyed a true mix. I'd say we are completely saturated among the big real estate investment trusts (that own many sizable apartment communities). But we also have a good number of mom and pop investors, down to people who may have bought a single condo and are going to rent it as an investment.

Q: What about those 20-somethings? Are they going to continue to bunk with their families or are they ready to go out on their own?

A: We asked the managers if they had seen a change in the demographic makeup of their renters. Seventy-five percent said prospects applying for apartments are younger or the same age, as compared with a year ago. The majority of property managers said they're seeing demographic shifts in family status among their prospect base, and 30 percent of those surveyed said they were seeing more singles renting their own places. Twenty-two percent said they're seeing more friends renting together.

Also, 42 percent said the applicants have higher incomes than they had a year ago.

I think that's a hopeful sign that the slow pace of improvement in the economy is helping young people get out of their parents' houses and into their own places.